Pakistan Economy Watch (PEW) on Sunday said growing non-performing loans (NPLs) has become a threat for financial system, which should be taken as a challenge by monetary authorities. Growing NPLs are a result of unheard-of level of government borrowings, which has choked the productive sector of the country, said Dr Murtaza Mughal, President PEW.
He said that NPLs continue to grow since few years and now they have toughed unprecedented level of rupees 594.5 billion, which should be a source of distress for the economic managers trying to bring economy back on track, it said. He said that banks would feel comfortable to lend to government than financing private sector whose repayment capacity is on a constant decline. It is also a bad news for our agricultural sector which is yet to recover from pain inflicted by floods, he added.
Slow moving economy, high interest rates, energy shortages, law and order, dwindling rupee, double-digit inflation, weak recoveries, tradition of writing-off loans advanced to influential, and political uncertainty are some of the factors contributing to the NPLs. Declining foreign investment, slumping domestic savings, political interference and inefficiency of some financial institutions are also some to be blamed, he dilated.
President PEW said that authorities should take these developments seriously lest banks further reduce financing private sector to keep themselves in the business. This will also hurt growth and add to the problem of unemployment, he warned. Prevailing difficult operating environment for banks and difficulties in enhancing revenues should be taken seriously by all stakeholders, he advised. Concluding, he said that time has come for the government to limit borrowing and take practical steps to improve our poorly regulated monetary system, which is not helping anyone but the ruling elite.
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